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Wednesday, 13 March 2013

Second Chance Properties Limited

Today i added 10 lots of Second Chance Properties Ltd at 41.5 cents each. It has 3 core business of apparel retailing, gold jewellery retailing and properties investment. The website is here and it has an interesting annual report with FAQs. The 2012 annual report is here.

It started with 2 shops in 1999 but as of today, the company holds 62 properties and is a major contributor to its operating profits.

I never like this company in the past when it was an apparel retailer, not sure if you can still remember the TV advertisement where a lot of "ang mo" models were used to sell the clothes "2nd Chance" with a very catchy tagline "Give yourself a second chance...". I think the apparel business was doing fine cos everyone thought it was a "foreign label". When everyone knows that it is just a local brand using "foreign talents" to sell the products, sales dry up and the company went into difficult times.

The company then changed its strategy targeting to sell gold and apparel to the Malay community here before branching out to property investments. Today, properties contribute to the majority of the profits after tax. I buy into this companies because of the recurring nature of the rental income from the properties and the possibility of asset value appreciation due to the rising property prices. I would not have considered this company if it is a pure apparel retailer. It is more a "landlord" to me.

The Company has been buying back its shares recently at between 38-39.5 cents. Assuming the dividend of 3 cents is maintained (which in my view is probably likely), the yield is around 7.2% based on my entry price of 41.5 cents but it can go higher if special dividends are announced.

The Company changed its Financial Year 2012 from June to Aug last year (14 months), thus you will likely see a drop in revenue and profits for FY13 ending 31 Aug 2013 as it is back to 12 months.

Once again, this is a yield play for me. I am not looking for capital gain in this purchase. More to diversify my passive income stream to different companies and the potential yield of 7-8% is adequate for me.